from washington, "the mclaughlin group," the american original. for over two decades, the sharpest minds, now is the time to deal with the fiscal problems we have in an adult-like manner. no more whistling past the graveyard. >> ohio republican congressman and speaker john boehner presides over the largest republican majority in more than 60 years, 240 republicans, 192 democrats, in the house of representatives. this means that for president obama to push through any of

his legislation, he must have the support of speaker boehner. recently, speaker boehner played that critical role when he gained house republican support for the current 2011 federal budget. that governors u.s. spending for fiscal year october 1 of last year, 2010, through september 30 of this year, 2011. this budget averted a shutdown of the federal government. the successful passage of the fy2011 budget was a major feather they're in the boehner cap. >> i'm pleased that senator reid and i and the white house have been able to come to an agreement that will in fact cut government open. >> question, the last time the republicans took over the house was in 1994, 17 years ago, when bill clinton was president. if you compare house speaker john boehner to then former house speaker newt gingrich, how well is boehner doing?

i ask you, major garrett. >> this lots of ways to measure that. one is the polling data. for 12 polls for newt gingrich's he's negatives were always higher than his positives. john boehner's positives are yawl to his negatives so he's doing better in the polling with the american public. congress's approval rating though is lower now than it was in the mid-90s. congress is held in much higher contempt now than then. that's the outside the beltway analysis. the inside congress analysis is that this stage of speaker gingrich speakership he already had the contract of america through, to 10 high priority items sos he had more legislative victories than boehner does now. but that was the effective end of the gingrich speakership. and he had no follow-up and diminishing powers and -- boehner has taken a gradsistic approach, removing power from the speakership, giving it more to the chairmen, allowing

legislation to move through the house, that is giving him gretzer confidence, getter latitude to strike deals some boehner internally is stronger and is probably going to remain stronger as a speaker than gingrich was. >> do you think all of that which is good perception on major's part. is there something more constitutionally about the two? who is more likable? >> well, at the beginning you would have thought that newt gingrich was the likable. towards of end every his regime he was much less likable. but what he had and this is not yet evident in boehner's approach, he had an hints electriccual and policy concept that was implicit in the contract with america, and he still speaks in those terms. he is an extraordinary intelligent man about these issues. but hey, his political skills i think were not shall we say well illustrated as his speakership went on. boehner i think will endure as

-- much more popular and stronger speaker within his own party over the next couple years because he is -- as major was saying, he shares the power a lot more. beginning rich really revolutionized the way he organize the republicans and therefore lost some of his grassroots support. >> eleanor, who is the more politically ambitious? >> by almost measure boehner is the superior speaker. politically am business, newt gingrich is running for president. it's not much of a campaign. i don't think we'll ever see john boehner run for president. but i think that's beside the point. boehner is a man who has ben in the congress a long time. he's been edged out of leadership, managed to get back in. he's a very crafty politician. he goes down smooth like scotch on the rocks. he is almost from another era. and he is smart enough to always appear reasonable in public. and he has quite a challenge with his tea party freshmen in trying to put together a deal

to raise the debt ceiling. so i think he's a deal maker, and gingrich wasn't. and so that's why i'd much rather have boehner in position. >> james, do you think boehner has a shot at the presidency? >> i'm unaware he's expressed any desire. >> you think he has a shot at it? >> well, i'll wait for him to express some desire. we'll see what the -- >> independently of that, whether he expresses desire or not, do you think the goods are there? >> i'll tell you. >> he comes from iowa. >> from ohio. >> from ohio, rather. >> that's a great place to be from, if you want to run for president. but he does have one small problem. there's a lot of tea party folks who are going in power and prominence, public and party, they're not quite so sure about john boehner. don't like that budget deal that you referred to, that 2011 budget deal. they don't think they got very much. >> he'll be instrumental in that they will like?

>> i think -- when he became speaker he had a narrow agenda and expressed it himself. stop the bad stuff from happening. so far he's been pretty successesful. whether the broader agenda -- and one thing tea partyers do like is he's giving a lot of leeway to committee chairman, particularly paul ryan to push through hit budget cutting plan which is fantastic. >> you remember the early stories on boehner, boehner had a problem with his gland. >> not a problem but a challenge. >> he would -- he wept a lot. >> yes. >> no sign of that. >> no. >> that's gone. >> yes, and the only presidential question is success. he doesn't want to be president. >> boehner so declare that? >> it's internally parts of his constitution. he's an institutionalist. he wants to be speaker. this is the highest priority in his life. he's achieved it. the other big difference between boehner and gingrich, john boehner was once a

committee chairman. he pushed legislation through, he knows how to make deals at the committee levels and he believes in the houseworkiwn. gingrich placed all powerful righting legislation in the hands of a tight-knit group of people around the speaker, dennis hastert continued that, nancy pelosi continued that. john boehner is unwinding that concentration of power, making the house a different place. >> i think he's got a shot. >> at becoming the president? >> yes. >> i don't see that, john. >> just think about it. >> i just think there are other people are. >> his brand of republicanism would carry. >> but i don't think he has the -- either the ambition or personality to do that. >> he likes golf too much! to go on campaign trails. >> what about eisenhower? eisenhower liked golf a lot more than boehner! >> exit question, has john boehner brought civility back to congress, yes or no? >> i think to a great extent. he is more calmer, reasonable, rational guy. he's done a good job doing

that. >> he's laid back, but he's representing a republican caulk thaws is really hard edged so don't get fooled by the coming along. >> that's the acid test. everyone knows that. when you bring him to the floor are have a chance to express themselves in the committee process and on the floor, they get their shot. that's what people want their voices expressed that way. it's that that brings civility, not other became you let people speak, and as they speak they become more civil. it's a natural process. >> is he a deal maker? >> absolutely. >> isn't that a great advantage? >> just in life in general, and in politics particularly. >> politics in particular. >> what do you think about -- am i overselling boehner. >> a little bit. but he's an engaging personality. >> he grows on you. >> very important together a deal. >> when you see boehner, don't you get the impression you're dealing with the real thing, the real boehner? >> absolutely. >> and even though you know there's aered and layered over

with politics, it's still the real thing? >> happen to know newt matter o and it's basic. >> well stated. when we come back, fannie and freddie. are they riding high or are they on death row?

issue two, fannie and fried, capital punishment? >> the federal national mortgage association, also known as fannie mae, and the federal home loan mortgage association, also known as freddie mac, were both created by the u.s. government. the two exist with the same purpose -- to increase homeownership by increasing the number of mortgages issued to u.s. homeowners. this is how they work. fannie and freddie buy mortgages from banks, and sell

them to investors as securities. that frees up capital for banks to issue more mortgages, naturally, long-term fixed interest rate mortgages. but critics have fingered them with playing a major role in spurring the great recession. they say fannie and freddie sold shoddy mortgages to wall street. when those mortgages defaulted, so did the stock market, spurring the crisis. so says former policy. if the u.s. government had not chosen this policy path, the great financial crisis of would never have occurred." more fannie and freddie, we're talking about two institutions, and the average american can't walk in there and take a mortgage. who is -- who do they deal

with? >> they deal with other financial in institutions, who in turn put their mortgages with fannie and freddie. that's the bulk of the mortgages. the point that peter is making is absolutely right, in the sense that the congress conspired with fannie mae and freddie mac and they pushed it on their own to really loosen the standards on the basis of which people were able to buy homes. it's on the theory that housing prices would never go down some everybody thought instead of having 20% down, it got down to lower percentages so there was very little equity and when the market began to turn down, the home mortgages went into default in the millions, not just in the thousands, and it brought down the financial market, and that is still something that we are still dealing with as we sit here today. >> so you buy stock in fannie and freddie? >> they were public companies. that was one of real issues because they had -- the people who managed that company had a different incentive than just

making sure that shall we say those loans about good loans. they were giving the loans to everybody. the congress presseds them to do that. but it turned into a huge multi- -- >> it's a capitalistic enterprise. they wanted to make money. >> yes, but it was all with government money. that's the problem. >> making money on the market. >> that's correct. >> isn't that an oddity? >> yes, it is an oddity. and it turned on the to be a disgrace in terms. way it worked out. >> why, because it was missing? because they had an incentive to improve the stock price and not worry abouter -- >> by making all these loans huh short-term profits and long- term losses. you were able to book gains in the short run, and so many of these -- millions -- [everyone talking at once] >> why are we talking about this? why? >> because wall street wants to make it look like fannie and freddie were the drivers behind the mortgage collapse, when in fact wall street led the way and fannie and freddie

basically caught up. i think fannie and freddie were the product of government policy, both parties, and president bush championed the ownership society, and pushing low cost mortgages were part of the republican inroad into the hispanic community some this wreaks of politics, but you cannot say that fannie and freddie led the way with all those financial instruments. fannie and freddie got into the act when they lost a great section of the mortgage market because goldman sachs and meryl lynch and everybody else was trading on these financial instruments, and the unregulation allowed them to go ahead some they were part of the crowd but they did not lead the way. >> i think the stock is worth about 3 cents apiece, for each -- any stock you buy there now is -- diminished validew. >> then they were taken by the federal government. congress said they would face

$25 billion with losses. i say they will face $500 billion. already banks are paying back their money. >> what kinds of investment? >> zero. >> that's right. >> 50 billion banks to far lost to taxpayers, loss to taxpayers, $150 billion. it will be more. obama administration wants to wind it down. republicans want to wind it down it's all a matter of pacing. it will be wound down. but it can't be wound down because there so much inventory in the market that can't and won't clear. you're not going to clear fannie and freddie until you clear the market. and the market won't clear for five to 10 years. >> they're providing over 90% of the mortgages in america. they're the only institution willing to loan become what you they did was they lost a fortune in terms of long-term -- >> because they were gse, government sponsored entity, that had the implied backing of the federal taxpayer. and that's why they were riskier than they should. >> james, i don't want do you think there's a tutorial and you're eck clued.

this is a group discussion. you people and feel as though you've been represented enough? >> go to the exit question. >> i'll defer to your judgment on that. >> let's go on the exit question. should fannie and freddie be terminated? should we get really of them, yes or no? >> no, i think they should are be wound down, privatized. and if a republican wins the presidency i think they will be. certainly republicans and conservatives feel they're at the heart of the entire financial mess, and i don't think that they'll be long for this world if that political situation develops. >> does that reflect the president's view? >> no, president obama reflects owners' view, and we also haven't mentioned very loose fed policy for many years. >> what was george w. bush's view today on freddie and -- fannie and freddie? >> well, i'm not sure what his view would be but too much emphasis in policy pushing

ownership. fannie and freddie were huge part of that. and bill clinton had a huge role in lowering mortgage standards. >> both parties political a pointees who made far too much money. [everyone talking at once] friend by the obama administration, through congress, that will wind down these government entities. >> what is in the public interest, major? should they be -- >> more rental property. >> seriously, i'm not kidding. the idea -- [everyone talking at once] >> the homeownership can be a universal american aspiration, yes. reality, no. bad things happen. >> there's another player in the scene that hasn't been mentioned, alan greenspan. he really pushed real estates. >> he pushed interest rates down in 2001 when when had the dot-com bubble bursting and he was worried the financial markets may come apart and then those interest rates were kept down for 1% for three or four

years. that lowered mortgage rates and everybody jumped into the mortgage market. >> you think they should be terminated? >> yes, i do. >> you do. i'm with you. issue three, groovy grover! >> conservatives have been stallworth supporters every big defense spending, but a conservative factor now wants to shrink the size of the pentagon the deficit fought, namely, the head of the americans for tax reform grover norquist. last november he sent a letter to republican leaders calling for congress to -- norquist in january said shrinking the pentagon meant that conservatives need to

rethink our presence in afghanistan. >> >> question, next year's g.o.p. presidential ply mares, will defense spending be hands off or will defense spending become a wedge issue that divides the contendsers? i'll ask you, james. >> i think they're already divided. i think tim pawlenty is taking a super-hawk pro defense, we're not going to cut defense spending stance. other candidates, ron paul, jon huntsman are for shrinking the budget. it's about 5%. at the ends of the clinton era it was 3. i think there's tremendous appetite in both parties to lower defense spending. what will republicans offer to democrats in return for getting

entitlement reform and they don't want to raise taxes. they might office defense cuts. >> south carolina senator senator graham can't imagine a republican running to the left of president obama on defense policies. but i think it's really hard to see what is the emerging worldview coming from this sets of republicans but they've been freed by the fact there's a democrat in the white house to be critical of military engagements but haven't defined where they would get involved and what they would do without that. >> what do you think? >> two prisms. one is operational. draw down afghanistan and the war in iraq. that saves money. the other one is repetitive systems. the f35, there was a dual engine, in the projects 15, 20 years. it was killed in the 2011 budget deal. john boehner cared about that, built outside of his district. he let that stay. individual projects like that will go operational costs will come down. >> gates had a big role in that. >> yes, he did. >> go ahead. >> yeah, i think they'll center to try to cut the defense

budget by, i don't know, 500 -- 50, 100 billion, dollars00 billion is the number i've seen over 10 years. >> okay with reducing the budget? >> yes. >> worry you? >> china -- >> if we don't maintain a position of worlds military superiority we won't be the number one in the world, check? >> if we let our economy down the toilet, we won't be number one in the world either. and we can't afford this! >> we're not number one militarily in the world -- in our -- in our circumstances. we will still be -- not be the number one -- [everyone talking at once] worlds power? >> spend as much money as the next 15 countries we'll still be the number one military power. [everyone talking at once] >> naval power and counterinsurgency. that's where you'll see the spending emphasis. >> we center to maintain military superiority over everyone to be the worlds's number one. >> we have -- [everyone talking at once] >> we can do that with spending -- >> or china will do it.

we'll be right back with predictions. ♪

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